Abstract Transfer learning, the reuse of newly acquired knowledge under novel circumstances, is a critical hallmark of human intelligence that has frequently been pitted against the capacities of artificial learning agents. Yet, the computations relevant to transfer learning have been little investigated in humans. The benefit of efficient inductive biases (meta-level constraints that shape learning, often referred as priors in the Bayesian learning approach), has been both theoretically and experimentally established. Efficiency of inductive biases depends on their capacity to generalize earlier experiences. We argue that successful transfer learning upon task acquisition is ensured by updating inductive biases and transfer of knowledge hinges upon capturing the structure of the task in the inductive bias that can be reused in novel tasks. To explore this, we trained participants on a non-trivial visual stimulus sequence task (Alternating Serial Response Times, ASRT); during the Training phase, participants were exposed to one specific sequence for multiple days, then on the Transfer phase, the sequence changed, while the underlying structure of the task remained the same. Our results show that beyond the acquisition of the stimulus sequence, our participants were also able to update their inductive biases. Acquisition of the new sequence was considerably sped up by earlier exposure but this enhancement was specific to individuals showing signatures of abandoning initial inductive biases. Enhancement of learning was reflected in the development of a new internal model. Additionally, our findings highlight the ability of participants to construct an inventory of internal models and alternate between them based on environmental demands. Further, investigation of the behavior during transfer revealed that it is the subjective internal model of individuals that can predict the transfer across tasks. Our results demonstrate that even imperfect learning in a challenging environment helps learning in a new context by reusing the subjective and partial knowledge about environmental regularities.